Hyundai Accelerates China-Only SUV Amid Missile Shield Spat

(Bloomberg) -- Hyundai Motor Co. and its Chinese partner plan to speed up the introduction of a China-only SUV model to draw in buyers after South Korea's planned deployment of a U.S. missile shield hurt consumer sentiment in its biggest market.

South Korea's largest automaker will sell three new models including the SUV and upgrade some existing ones this year, BAIC Motor Corp., Hyundai's Chinese partner, said in a statement on Thursday. The local joint venture, Beijing Hyundai, cut production and supply to ease pressure on dealers after retail sales fell 30 percent in the January-to-February period, it said.

Hyundai's deliveries slumped in the first two months after a tax cut on small-engine capacity cars was rolled back at the start of the year, only to be compounded by a drop in showroom visits and postponement of purchases after South Korea decided to host a U.S. missile-defense system, a move that was opposed by China. Competitors have also initiated special promotions targeting its customers, Hyundai has said.

“Under the confluence of multiple negative factors, Beijing Hyundai had weaker end-market performance than other brands,” BAIC said in the statement. “Beijing Hyundai will boost market confidence via proactive adjustment measures to ensure it meets full-year sales goal.”

Beijing Hyundai brought forward and used the down period to perform routine maintenance work, preparing for a rebound in the market, BAIC said.

Tensions have risen between the countries over the decision to bring the missile-defense system, known as Thaad, onto South Korean soil. Seoul and the U.S. say Thaad is to counter the missile and nuclear threat posed by North Korea, but China argues its own military capabilities could be affected by the system.

China, which absorbs a quarter of South Korea's overseas shipments, has put the squeeze on some Korean companies, prompting Seoul to raise the possibility that Beijing is violating World Trade Organization rules with its actions against South Korea's tourism and retail sectors.

Hyundai's shares have climbed 1.4 percent this year, trailing the 6.2 percent gain in the benchmark Kospi index.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net.

To contact the editors responsible for this story: Chua Kong Ho at kchua6@bloomberg.net, Subramaniam Sharma

With assistance from Tian Ying